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Will Inflationary Impacts Hurt Raytheon (RTX) in Q3 Earnings?
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Raytheon Technologies Corp. (RTX - Free Report) is set to release third-quarter 2022 results on Oct 25, before market open.
Raytheon delivered an earnings surprise of 10.53% in the last four quarters, on average. Growing international travel demand is likely to benefit Q3 results amid lower 787 deliveries and inflationary impacts.
Pratt & Whitney and Collins: Key Growth Catalysts
The merger between legacy missile-maker Raytheon Company with multinational conglomerate United Technologies, resulting in the formation of Raytheon Technologies, was completed in April 2021. Consequently, Raytheon Technologies’ third-quarter 2022 results are expected to benefit from the incremental merger synergies.
Raytheon Technologies Corporation Price and EPS Surprise
Also, cost synergies from the acquisition of Rockwell Collins are anticipated to bolster the company’s soon-to-be-reported quarter’s results.
Growing international travel demand, thanks to continued recovery in air travel, is likely to have boosted the company’s overall commercial OEM as well as aftermarket sales in the third quarter. This, along with solid growth from Pratt’s commercial engine business as well as higher F-35 aftermarket volume, must have driven the sales growth expectation for both its Pratt & Whitney as well as Collins business units, along with solid acquisition synergies.
However, headwinds related to lower deliveries of 787 jets might have partially impacted the performance of these two units in the soon-to-be-reported quarter.
The Zacks Consensus Estimate for Pratt & Whitney segment Q3 revenues is pegged at $5,278 million, implying an improvement of 11.7% from the 2021 third-quarter figure. The estimate for Collins Aerospace indicates an increase of 13.2%.
Bleak Outlook for Missile and Defense
Although growing global budgets have led Raytheon to witness solid order growth in the recent past, ongoing material availability delays and the associated productivity impact might have adversely impacted the Q3 performance of the Raytheon Missiles & Defense segment.
The Zacks Consensus Estimate for Missiles & Defense segment Q3 revenues is pegged at $3,887 million, suggesting a slip of 0.4% from the 2021 third-quarter figure.
Other Factors to Note
Amid the ongoing conflict between Russia and Ukraine, RTX ceased its business activities with Russia, which in turn might hurt Q3 sales. Also, constant supply chain pressure across its business might have had an adverse impact on its overall bottom-line performance.
Further, slower-than-expected recovery in material receipts and the resulting impacts on Raytheon’s productivity along with increasing inflationary pressure in labor, freight and other indirect cost areas might have dragged down the company’s Q3 earnings, outweighing sales growth benefits.
Q3 Expectations
The Zacks Consensus Estimate for Raytheon Technologies’ third-quarter earnings is pegged at $1.12 on revenues of $17.11 billion. The earnings and revenue estimates indicate an 11.1% decline and a 5.6% improvement, respectively, from the year-ago quarter’s reported numbers.
What Our Model Predicts
Our proven model does not conclusively predict an earnings beat for Raytheon Technologies this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. This is not the case here.
Currently, Raytheon Technologies has an Earnings ESP of -3.33% and has a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Below are two defense stocks that have the right combination for an earnings beat:
SPR delivered a four-quarter average negative earnings surprise of 100.31%. The Zacks Consensus Estimate for Spirit AeroSystem’s third-quarter bottom line is pegged at a loss of 39 cents, which implies a solid improvement from a loss of $1.13 incurred in the third quarter of 2021.
TransDigm Group (TDG - Free Report) : It is scheduled to release its third-quarter results soon. TDG has an Earnings ESP of +5.86% and a Zacks Rank #3.
TDG delivered a four-quarter average negative earnings surprise of 5.95%. The Zacks Consensus Estimate for TransDigm’s third-quarter earnings, pegged at $5.03, suggests an improvement of 18.4% from the third quarter of 2021.
An Upcoming Defense Earnings
Spire (SPIR - Free Report) is slated to report its third-quarter results on Nov 9. It holds a Zacks Rank #2.
The Zacks Consensus Estimate for SPIR’s third-quarter earnings, pegged at a loss of 10 cents, has remained unchanged over the past seven days. SPIR boasts a long-term earnings growth rate of 7.9%.
Image: Bigstock
Will Inflationary Impacts Hurt Raytheon (RTX) in Q3 Earnings?
Raytheon Technologies Corp. (RTX - Free Report) is set to release third-quarter 2022 results on Oct 25, before market open.
Raytheon delivered an earnings surprise of 10.53% in the last four quarters, on average. Growing international travel demand is likely to benefit Q3 results amid lower 787 deliveries and inflationary impacts.
Pratt & Whitney and Collins: Key Growth Catalysts
The merger between legacy missile-maker Raytheon Company with multinational conglomerate United Technologies, resulting in the formation of Raytheon Technologies, was completed in April 2021. Consequently, Raytheon Technologies’ third-quarter 2022 results are expected to benefit from the incremental merger synergies.
Raytheon Technologies Corporation Price and EPS Surprise
Raytheon Technologies Corporation price-eps-surprise | Raytheon Technologies Corporation Quote
Also, cost synergies from the acquisition of Rockwell Collins are anticipated to bolster the company’s soon-to-be-reported quarter’s results.
Growing international travel demand, thanks to continued recovery in air travel, is likely to have boosted the company’s overall commercial OEM as well as aftermarket sales in the third quarter. This, along with solid growth from Pratt’s commercial engine business as well as higher F-35 aftermarket volume, must have driven the sales growth expectation for both its Pratt & Whitney as well as Collins business units, along with solid acquisition synergies.
However, headwinds related to lower deliveries of 787 jets might have partially impacted the performance of these two units in the soon-to-be-reported quarter.
The Zacks Consensus Estimate for Pratt & Whitney segment Q3 revenues is pegged at $5,278 million, implying an improvement of 11.7% from the 2021 third-quarter figure. The estimate for Collins Aerospace indicates an increase of 13.2%.
Bleak Outlook for Missile and Defense
Although growing global budgets have led Raytheon to witness solid order growth in the recent past, ongoing material availability delays and the associated productivity impact might have adversely impacted the Q3 performance of the Raytheon Missiles & Defense segment.
The Zacks Consensus Estimate for Missiles & Defense segment Q3 revenues is pegged at $3,887 million, suggesting a slip of 0.4% from the 2021 third-quarter figure.
Other Factors to Note
Amid the ongoing conflict between Russia and Ukraine, RTX ceased its business activities with Russia, which in turn might hurt Q3 sales. Also, constant supply chain pressure across its business might have had an adverse impact on its overall bottom-line performance.
Further, slower-than-expected recovery in material receipts and the resulting impacts on Raytheon’s productivity along with increasing inflationary pressure in labor, freight and other indirect cost areas might have dragged down the company’s Q3 earnings, outweighing sales growth benefits.
Q3 Expectations
The Zacks Consensus Estimate for Raytheon Technologies’ third-quarter earnings is pegged at $1.12 on revenues of $17.11 billion. The earnings and revenue estimates indicate an 11.1% decline and a 5.6% improvement, respectively, from the year-ago quarter’s reported numbers.
What Our Model Predicts
Our proven model does not conclusively predict an earnings beat for Raytheon Technologies this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. This is not the case here.
Currently, Raytheon Technologies has an Earnings ESP of -3.33% and has a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Below are two defense stocks that have the right combination for an earnings beat:
Spirit AeroSystems (SPR - Free Report) : It is scheduled to release its third-quarter results on Nov 3. SPR has an Earnings ESP of +47.19% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
SPR delivered a four-quarter average negative earnings surprise of 100.31%. The Zacks Consensus Estimate for Spirit AeroSystem’s third-quarter bottom line is pegged at a loss of 39 cents, which implies a solid improvement from a loss of $1.13 incurred in the third quarter of 2021.
TransDigm Group (TDG - Free Report) : It is scheduled to release its third-quarter results soon. TDG has an Earnings ESP of +5.86% and a Zacks Rank #3.
TDG delivered a four-quarter average negative earnings surprise of 5.95%. The Zacks Consensus Estimate for TransDigm’s third-quarter earnings, pegged at $5.03, suggests an improvement of 18.4% from the third quarter of 2021.
An Upcoming Defense Earnings
Spire (SPIR - Free Report) is slated to report its third-quarter results on Nov 9. It holds a Zacks Rank #2.
The Zacks Consensus Estimate for SPIR’s third-quarter earnings, pegged at a loss of 10 cents, has remained unchanged over the past seven days. SPIR boasts a long-term earnings growth rate of 7.9%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.